4 Student Aid Experiments Will End

The Department of Education will end four experimental initiatives launched under the Obama administration granting participating institutions a waiver from certain statutes concerning federal student aid. Those initiatives, known as experimental sites, included a program popular with colleges allowing them to limit the unsubsidized loans a student could take out.

The colleges were informed of the news by Jeff Baker, policy liaison and implementation director at the Office of Federal Student Aid, in a letter to participating institutions. Baker said the department made the decision to conclude the experiments at the end of the 2016-17 award year, or June 30, because analysis of data collected from those institutions had not provided sufficient information to support continuation.

In addition to the loan limits experiment, the department will end the following sites:

  • A program allowing individuals with bachelor's degrees to enroll in vocational programs using Pell Grants
  • A program allowing colleges and universities to offer training programs shorter than the statutorily required amount of time to Pell recipients
  • A federal work-study initiative allowing institutions to pay work-study recipients to serve as peer counselors for high school students

Experimental sites authority gives the department the ability to grant waivers to federal statute so that it can study the effect of potential policies on a limited basis. The Obama administration launched more than a dozen experimental sites initiatives between 2011 and 2017, winding down several of the initial experiments last year. Eleven programs remained before the notices from the department this month. The best known of the remaining experiments may be the Second-Chance Pell initiative and another initiative allowing participating institutions to require loan counseling for student borrowers.

"My guess is that the new administration expressed some interest in doing additional experiments," said Clare McCann, a senior policy analyst with New America's Education Policy program and a former Obama Department of Education official. "FSA only has the capacity to monitor a certain number of these at a time."

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Education Dept. Defends Gainful Employment

The Trump administration defended the gainful-employment rule in federal court Wednesday, suggesting that it may not quickly roll back the regulation designed to crack down on programs graduating students unable to pay down high student loan debt loads.

The American Association of Cosmetology Schools filed a lawsuit in February to block the rule, arguing that gainful-employment data undercounted income of cosmetology program graduates. The suit argued those workers depend on gratuities and cash payments, while many underreport income. Administration lawyers argued on behalf of Education Secretary Betsy DeVos in a court filing Tuesday that challenges to the rule itself had already rejected by the courts, that no cosmetology program has yet to have access blocked to Title IV aid, and that the association had failed to provide evidence that underreporting of income was widespread among cosmetology graduates.

Republican lawmakers have been outspoken in their criticism of the gainful-employment rule, which was issued last year after two rounds of negotiated rule making and multiple court battles. DeVos declined in a January confirmation hearing to commit to enforcing the rule in response to questions from Senator Elizabeth Warren, a Massachusetts Democrat.

The department earlier this month pushed back deadlines for programs to submit appeals of debt-to-earnings ratios, raising concerns among proponents of the rule that the administration would not aggressively enforce it.

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Report: Public Money Skews Gainful-Employment Rule

A new report from the American Enterprise Institute argues that state and local funding of public colleges stacks the deck against for-profit institutions under the gainful-employment rule, an Obama administration regulation that measures the ability of graduates of vocational programs to repay their student loans. The rule covers nondegree programs at nonprofit colleges -- mostly community colleges -- and all for-profit programs.

Roughly three-quarters of for-profit programs pass the rule, the report said, compared to a relatively small number of nonprofits that are covered under gainful employment. Direct public funding drives much of that disparity, according to the report's authors.

"Higher tuition at for-profits means students take on more debt, while public institutions have the luxury of charging lower tuition due to their direct appropriations," the report said. "Therefore, even if a for-profit institution and a public institution have similar overall expenditures (costs) and graduate earnings (returns on investment), the for-profit institution will be more likely to fail the gainful-employment rule, since more of its costs are reflected in student debt."

Congressional Republicans and the Trump administration have said they will seek to roll back gainful employment and other Obama-era regulations aimed at for-profits. But such nixing of the rules likely will take time. And this week the U.S. Education Department defended gainful employment in federal court.

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2 Think Tanks Weigh In on Accreditation

A new report from the Center for American Progress says 12 of the largest accrediting agencies lack the budgets and staffing necessary to adequately monitor the quality of colleges they oversee.

For example, the left-leaning group found, the 12 accreditors in 2013 spent a total of $75 million on quality assurance. As a result, the agencies are serving as gatekeepers to $1,693 in federal aid for every dollar they spend to oversee colleges. The report also cited the argument that accreditors are vulnerable to expensive lawsuits when a college challenges a sanction in court.

The conservative Heritage Foundation also released a report on accreditation this week, calling on the U.S. Congress to decouple federal aid financing from the accreditation process. Instead, the report called for all federal loans to be issued under the terms of graduate Stafford Loans.

Heritage also voiced support for a 2014 legislative proposal from Senator Mike Lee, a Utah Republican, that would allow states to opt out of the current, federally sanctioned accreditation system and to instead set their own rules for accreditation. That might mean accrediting and issuing aid for alternative programs of study and even individual courses.

"This student-centered approach to accreditation reform could foster much-needed innovation in higher education and link student learning to skills needed in the marketplace," the Heritage report said.

In its report, the Center for American Progress called for accreditors to set minimum fees for their member institutions and to increase those fees on poor-performing colleges.

"Changing the funding structure could accomplish two goals. First, higher revenue would allow accreditors to hire more staff and focus more time and energy on schools in need of improvement," the report said. "Second, higher fees and more oversight for low performers would create incentives to improve performance. Accreditors should work to ensure these fees are adequate but not overly burdensome."

Barbara Brittingham, chair of the Council of Regional Accrediting Commissions and president of the Commission on Institutions of Higher Education, New England Association of Schools and Colleges, responded to the Center for American Progress report with a written statement. While Brittingham said she appreciated that the report seeks enhanced legal protections for accreditors, she said its take on the agencies' staffing levels failed to recognize contributions of volunteers in the current peer-review structure.

"It notes that regional accreditation in a recent year was supported by over 4,300 volunteers, but does not reflect the value of the expertise of these volunteers to the enterprise," said Brittingham. "Because these volunteers are generally college and university presidents, academic officers, senior faculty, and others with specialized expertise, including members of the public, regional accreditation operates with capacity that goes far beyond a count of its employees. The depth and diversity of volunteer expertise keeps capacity high while staying financially efficient. We don’t want to unnecessarily increase cost that would likely be passed along to students."

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White House Calls for More Cuts to Pell

The Trump administration has called on the U.S. Congress to cut $3 billion from the U.S. Department of Education's budget as part of $18 billion in new proposed cuts to social programs for the current fiscal year, according to news reports. The White House previously called for a $9.2 billion (or 13.5 percent) cut to the department for next year.

The new round of slashing would include a $1.3 billion reduction to the Pell Grant program's $10.6 billion surplus, according to Politico, which would be followed by a proposed cut of $3.9 billion next year.

Some congressional sources told Politico that it is too late in the budget process to follow through on Trump's requested slashing for this fiscal year.

Senator Patty Murray, a Washington Democrat and ranking member on the Senate's education committee, called the new White House proposals "absurd" and "absolute nonstarters" for her party.

"President Trump promised to stand up for struggling families on the campaign trail, and instead he is threatening to kick the ladder of opportunity and the chance at a middle-class life out from under millions of low-income students," she said in a written statement. "I hope Republicans join me in rejecting the anti-student proposals we’ve seen from the Trump administration in recent weeks that would destabilize the Pell Grant program, and work to protect access to affordable, high-quality higher education for all students."

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With IRS Data Tool Down, Lawmakers Ask Department of Ed to Assist Students

In a letter released Monday, the Senate and House education committees called on Education Secretary Betsy DeVos to assist students affected by the continued outage of the IRS data retrieval tool.

The recommendations in the letter overlapped with requests made by college access groups earlier this month as the complications from the tool's shutdown became apparent. Lawmakers asked DeVos to provide more prominent notice to students and parents that the tool was unavailable, to consider accepting signed copies of tax returns for verification of income instead of tax transcripts, and to make sure the Federal Student Aid call center was able to handle increased call volume created by the outage. They also indicated that the department should encourage more states with upcoming aid deadlines to follow the lead of Texas and Indiana, which announced they would move back their priority aid deadlines.

The data retrieval tool was introduced to speed the financial aid process and avoid errors by allowing students to automatically import tax data on file with the government into their application for federal student aid. The tool was shut down by the IRS and the Department of Education this month with no warning to applicants or student advocates. Later, the agencies said the tool was taken down because of concerns over security.

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Study: Income-Based Repayment Reduced Defaults

A new study links the drop in home prices during the Great Recession to the increase in student loan defaults over the same period. The study, released by the National Bureau of Economic Research, also finds student loan defaults concentrated among individuals with low-income jobs, which were shed as housing prices dropped. Significantly for student loan policy, the study finds that the income-based repayment program introduced after the recession led to fewer student loan defaults and protected borrowers against adverse income shocks.

Eligible student loan borrowers who did not enroll in income-based repayment, however, continued to have high rates of default after 2009, the authors found.

The study's authors were Holger Mueller and Constantine Yannelis, both of New York University's Stern School of Business.

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Two Debt Collectors Won't Raise Fees for Defaulted Borrowers

Two debt collectors said in separate statements this week that they will not assess collection fees on defaulted student loan borrowers who quickly enter repayment, despite new guidance from the Department of Education.

Both Great Lakes Higher Education Corporation and TG said they would maintain existing practices of not assessing debt-collection fees when borrowers enter repayment plans within 60 days of a default notice.

The Department of Education issued a notice on March 16 that it would rescind Obama-era guidelines restricting loan servicers from charging those defaulted borrowers fees up to 16 percent of their total balance. The decision won't affect borrowers of federal direct loans but could impact individuals with federally guaranteed FFEL loans, which make up almost half of total outstanding student loan debt.

“Many student loan borrowers already have a difficult time managing their loan obligations," said TG President and CEO James Patterson. "At TG, we want to help them successfully repay their student loans. Adding more fees does not help their situation.”

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Cleveland Fed Finds Rising Per-Student Tuition Revenue

Per-student tuition revenue increased sharply since the late 1980s at public and private nonprofit colleges and universities, even as state and local funding for the institutions declined, according to a new analysis from a Federal Reserve Bank of Cleveland economist.

An economist at the Cleveland Fed, Peter Hinrichs, examined trends in inflation-adjusted revenue per student at four-year colleges and universities in the United States between 1987 and 2013. He found tuition revenue per student rose by $5,700 in that time frame at public institutions, to $9,300. At private universities, tuition revenue per student rose from about $12,000 per student to nearly $20,000 per student.

Hinrichs also found that funding from the federal government rose. Meanwhile, investment returns can be large and volatile, he found.

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Republican member of Congress says Pell Grants discourage marriages

Republican congressman’s suggestion during hearing stuns aid experts. Many also object to his claim that students spend their federal aid on “goodies and electronics.”


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